Industry welcomes NYC retail tax cut, but warns more to be done to revive flagging high street

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An amendment to the Commercial Rent Tax passed by the New York City Council last week will make life a little easier for Manhattan’s small business community, but it’s far from a cure-all for the borough’s troubled retail sector.

Under the new tax code, which was adopted during the council’s meeting on Thursday, businesses below 96th Street that pay less than half a million dollars in annual rent will no longer have to pay the 3.9 percent tax in addition to the base property tax, which can be as high as six percent. Previously, the cutoff for the Commercial Rent Tax, also known as CRT, was $250,000 in annual rent.

Businesses paying between $500,000 and $550,000 as well as businesses that make between $5 million and $10 million a year will see their tax liability reduced on a sliding scale. The CRT does not apply to businesses north of 96th Street in Manhattan or other boroughs.

“Despite vast changes in the Manhattan real estate market and economic landscape over the last 15 years, the commercial rent tax has not been updated to reflect the realities on the ground,” City Council Speaker Melissa Mark-Viverito. “So this legislation reflects a long overdue step to provide relief to those businesses who have been struggling for far too long.”

After it goes into effect on July 1, 2018, the city council projects the tax change will account for a savings of $36.8 million between more than 2,700 businesses.

Robin Abrams

Robin Abrams, vice chairman of retail at Eastern Consolidated, said she supports the tax reform, which will provide necessary relief to the mom and pop shops and locally-owned ventures that have been driven from the city by rising costs in recent years. She expects the reform will make more small businesses willing to consider a Manhattan location.

“It will give a shot in the arm for deal-making because we’ve seen a lot of resistance in that segment,” she said. “It’s good for the city to address that by eliminating that extra cost to soften the blow.”

However, the reform will have no impact on large stores in key shopping areas such as Madison Avenue and SoHo, where surging rents and the impact of e-commerce have left business struggling to stay afloat and landlords hard-pressed to find willing tenants.

Abrams said the city’s main commercial corridors have been hit harder than residential neighborhoods in recent years, so she would like to see the city council consider reducing the CRT for larger businesses as well or possibly repealing it altogether.

“It’s a step in the right direction for making it more affordable to open and operate stores in New York City,” she said. “So it’s a good and positive thing, but it doesn’t fix everything and it won’t do anything about the major vacancies in the city’s high profile corridors.”

JOHN BANKS

Real Estate Board of New York President John Banks also called the CRT reform a “welcome first step,” toward what he, too, hopes will eventually be a full repeal. He said the change will save many small business owners between $11,000 and $13,000 in taxes.

Banks added that a number of other policies need to be revisited to better fit the rapidly evolving retail landscape.

“When you consider that online purchases are undermining the economic viability of brick-and-mortar stores across America, the burden that local government has placed on these stores starts to add up,” he wrote in a statement. “There are many costs to consider, including rising real property taxes, living-wage requirements, paid sick leave and byzantine land use regulations.”

For now, small business owners and restaurateurs are happy for whatever reprieve they can get.

New York State Restaurant Association president and chief executive Melissa Fleischut said in a statement, “With the cost of running a restaurant in New York City climbing to unprecedented levels, it is vitally important that we are doing everything we can to remove unnecessary burdens.

“These eateries are integral to the fabric of New York City and by raising the threshold for this tax we are ensuring that many of our favorite places have a greater chance of keeping their doors open.”